Hong Kong: 3 developments to note

This snapshot highlights three upcoming upcoming developments in the disclosure rules.

Treasury shares

• On 17 January 2025, the Companies (Amendment) Ordinance 2025 was published in the Gazette, which is expected to establish, among other things, a treasury share regime that allows Hong Kong incorporated companies to hold bought-back shares and sell or transfer treasury shares, providing more flexibility to listed companies to manage their capital.
• These new arrangements will come into effect on 17 April 2025. Investors should note that from that date they will be required to include such treasury shares in the Hong Kong company’s denominator for shareholder disclosures under Part XV of the Securities and Futures Ordinance (SFO).
• This will bring Hong Kong companies in line with the current position for non-Hong Kong incorporated companies, whose treasury shares are included in the number of shares of the listed corporation of the same class in issue in the calculation of percentage holdings under Part XV of the SFO.

Collective investment schemes

• The disclosure position in relation to listed CIS will be amended following the Securities and Futures Commission’s (SFC) publication on 8 October 2024 of consultation conclusions on, amongst other proposals, an enhanced market conduct regime for listed CIS under the SFO. Part XV of the SFO is expected to be extended to cover listed CIS, including real estate investment trusts. The SFC targets to complete the legislative process before the end of December 2025.
• As a reminder, the consultation policy intent was to impose similar disclosure requirements on unitholders in, and relevant personnel of, listed closed-ended CIS to those of substantial shareholders of listed corporations currently provided to the market.
• Rulefinder analyses the position of open-ended listed CIS in its Hong Kong Memorandum and an open-ended ETF in corporate form and listed on the SEHK, is technically a listed corporation under Part XV of the SFO and its corporate insiders therefore come under the disclosure regime. Some exemptions apply.
• Regardless of whether an ETF obtains a complete exemption, there is no look-through to its underlying assets, i.e. a unit/share holder of an ETF would not be taken to be interested in any shares held by the ETF (provided the ETF is not a controlled undertaking of the unit/share holder). 

Delisted securities

• In December 2024, the SEHK published a consultation paper “Proposals to Optimise IPO Price Discovery and Open Market Requirements” seeking views on (amongst other things) whether an OTC market should be established for delisted securities (sometimes referred to as a “pink sheet” market).
• It is considered that this would provide a platform for shareholders to a delisted issuer to trade out of their positions. The consultation remains open until 19 March 2025. We will monitor for any impact on the disclosure rules. 

Final remarks

It is worth noting that non-compliance with the shareholding disclosure laws is a criminal offence. Sanctions 
include imprisonment, fines and potential personal liability of a company's officers and members